We’re reaching the tail-end of the earnings season soon. The past few weeks have seen a flurry of activity among publicly-listed companies as they report their latest quarterly results. Those releasing poor results will likely have made their investors grumpy, while those that showed a better report card along with bigger dividends will probably have made their shareholders a happy bunch.
Let’s take a look at three companies that recently declared fatter dividends and likely helped put a smile on many faces.
Sinwa Limited (SGX: 5CN)
Sinwa is in the business of providing supplies to the marine and offshore industries in addition to logistics services such as warehousing and freight forwarding (organising shipment of goods from one point to another).
The company released its half-year results last Wednesday and declared an interim dividend of S$0.02 per share. There were no dividends for the corresponding period last year.
Sinwa had decided to pay out a dividend, when it previously did not do so, mainly to “return excess funds from [its] rights issue and proceeds from [the] sale of liftboat, KS Titan 2.” Out of the S$0.02 per share in dividends, S$0.015 consisted of a special dividend that was declared due to the aforementioned reasons.
In simple English, it means that the bulk of the dividends were funded by a previous injection of capital into the business by shareholders, as well as by a one-off occurrence of a sale of assets. Ideally, investors would want to see dividends grow bigger predominantly due to improving business conditions in a company and not through non-recurring events.
Sinwa’s results saw it post a 13.1% increase in top-line for the half-year to S$70.6m compared to a year ago while profits jumped 150% to S$4.9m.
Shares of the company are currently exchanging hands at S$0.235 apiece, representing a trailing Price-Earnings (PE) ratio of 8.3 and a forward dividend yield of 17% based on the annualised half-year dividend of S$0.02 per share.
Jaya Holdings (SGX: J10)
Jaya Holdings released its full-year results last Wednesday in which it declared a final dividend of 3.5 Singapore cents. It had previously declared an interim dividend of 0.5 cents earlier in the financial year, which brings the annual pay-out to 4.0 cents. There were no dividends declared for the previous financial year.
The company owns and operates a variety of offshore support vessels for the oil & gas industry in addition to building specialised vessels for different customers as well as for its own use.
Jaya posted a 145% year-on-year growth in annual revenue to US$202m for its latest full-year results as it had sold more vessels and seen more of its own vessels being hired for use.
However, there was a drastic drop in the company’s gross margins from 31% to 21% which meant that the explosive top-line growth only resulted in a profit that remain essentially unchanged at US$45.3m. There was no comment by management on the reduction in gross margins.
Shares of Jaya are worth S$0.63 each. At that price, it is selling for approximately 8 times trailing earnings and carry a dividend yield of 6.3% based on the latest full-year pay-out.
Straits Trading Company (SGX: S20)
Straits Trading Company’s business interests include the development, management, and ownership of properties and hotels in addition to tin mining & smelting in the Asia-Pacific region.
It reported its second quarter results last Wednesday and declared a special interim dividend of S$0.50 per share for the half-year. There were no dividends declared for the corresponding period in the previous year.
The earnings release saw Straits Trading Company post a 24% year-on-year decline in revenue to S$420m for the first six months of 2013. Its bottom-line on the other hand, saw a marked improvement as a S$12m loss for the corresponding period in the previous year became a S$69m profit.
The growth in profit was mainly due to a one-time gain of more than S$90m for Straits Trading Company after it sold its stake in WBL Corporation in May 2013.
Straits Trading Company’s shares are selling for S$4.27 a pop, representing a PE ratio of 33.7 and a forward dividend yield of 23% based on the annualised half-year pay-out.
Foolish Bottom Line
All three shares have dividend yields much greater than the Straits Times Index’s (SGX: ^STI) yield of around 2.6% but that does not automatically make them attractive dividend plays. For every company that pays a dividend, investors have to take note of the source of those dividends.
Some dividends are funded by one-off items that can’t be repeated every year. For such cases, investors have to be aware of the high possibility of shrinking dividends in the years ahead.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chong Ser Jing doesn’t own shares in any companies mentioned.